The Ministry of Commerce creates the enabling environment for sustainable and equitable economic growth and opportunity for all Afghans by promoting private sector development in a socially responsible free market economy.
Our vision is an improved quality of life, decent employment, and higher standards of living for all Afghans through the development of the formal economy.The Ministry of Commerce (MoC) is committed to Afghanistan’s constitutional commitment to protecting and promoting private investment within a free market economy, and to the realization of the Government’s economic vision as expressed in the National Development Strategy.
To achieve this mission and fulfill our vision, we have three strategic goals and a management goal. Each strategic goal involves activities that will directly impact the ability of all Afghans to secure the benefits of a growing economy.
Goal 1: Promote the establishment and implementation of a legal and regulatory framework necessary to ensure the efficient and equitable operation of a free market economy.
Goal 2: Integrate Afghanistan into the regional and global economy.
Goal 3: Facilitate and promote the development of a dynamic, competitive private sector.
Management Goal: Improve the capacity, effectiveness and efficiency of the Ministry of Commerce.
Promote the establishment and implementation of a legal and regulatory framework which will ensure the efficient and equitable operation of a free market economy.A central role of government is to develop and implement the essential legal and regulatory framework which ensures that the benefits of a free market economy are realized. The development of the legal and regulatory framework, based on international standards and best practices, will be critical to the ability of Afghanistan to attract investment, to promote exports, ensure the safety of goods in the domestic market and to ensure adequate levels of competition necessary for the equitable operation of the marketplace.
In the realm of commerce, the MoC is currently working to develop the framework for commercial law, rules and regulations for the conduct of business, the framework for effective systems of consumer protection and standards and to identify and eliminate existing administrative barriers to trade.The key objectives in this area are to:
General Goal/Objective 1.1: Ensure the development and effective implementation of a modern system of commercial legislation.
Much of the current commercial legal framework is governed by outdated legislation. The establishment of a modern system of commercial legislation in compliance with international standards is essential for the development of the private sector and attracting foreign and domestic investment.
The MoC serves as the focal point for the Commercial Law Working Group Project to develop an updated and sustainable Commercial Code for Afghanistan based on its existing Commercial Law of 1955. Under this project, the MoC has drafted the following measures for submission to the Ministry of Justice: Private Investment Law, Arbitration and Dispute Resolution Law, Commercial Conciliation Law, Partnership Law, Corporate Law, Foreign Entity Recognition Provisions, Contract Law, Intellectual Property Rights Law, Antitrust, Competition and Unfair Business Practices Law and Bankruptcy Law. The Ministry will continue to take a leading role in facilitating the adoption and implementation of these measures.
The MoC must also continue to provide input on all legislative matters related to the business environment including customs, mortgage, insurance, leasing legislation and accounting standards. Additionally, as the lead Ministry for WTO accession, the Ministry will work to ensure that new legislation is compliant with WTO regulations.
Over the past three years, the commercial legislative process has faced serious challenges including a lack of capacity in the relevant Ministries, the lack of cohesive government strategies and policies and difficulties in coordination among donors and the international community in regards to legal reform. Thus, the initiatives currently being completed at the MoC represent only the beginning of the Ministry’s work in facilitating the adoption and implementation of these laws.
Given the importance of the commercial legislative framework to the achievement of its mission, the Ministry must continue to work as an advocate to see that these laws are prioritized, passed and implemented. The MoC will work to build its capacity in this area in order to effectively fulfill its role.
General Goal/Objective 1.2: Establish an open, consistent and transparent business environment by systematically addressing regulatory barriers to foreign and domestic trade.
Administrative barriers to trade not only impose significant costs on existing businesses but also form a substantial barrier to entry for potential entrepreneurs – particularly Small and Medium Enterprises (SMEs).
The MoC has already undertaken a comprehensive review of the existing barriers to trade. Acting on this report, during April 2004, the MoC enacted the new business license regulation to simplify and streamline the licensing procedures. The new simplified procedure allows a business person to obtain a license within 48 hours compared to 30 days and is coupled with training and capacity building programs. The enactment of new corporate legislation will enable further revisions to unify and streamline this procedure.
In addition to the work on business licensing, a working group within the Ministry is currently engaged in reforming export procedures by identifying and rationalizing the required steps and procedures. The MoC must build on these successes by continuing to work with the private sector in the identification and elimination of such blockages. A working group associating the MoC and the Customs Department of the Ministry of Finance is addressing the simplification and streamlining of transit and customs procedures and documentation.
While many of the existing administrative barriers to trade are formed by outdated regulations and legislation, this must be an ongoing activity of the MoC as new policies and procedures are implemented. The MoC will work to develop a systematic review process of administrative barriers during which high priority areas for intervention could be identified and acted upon. Additionally, the Ministry must also subject new measures to the same scrutiny by engaging in an active process of regulatory impact assessment.
General Goal/Objective 1.3: Develop effective systems for consumer protection and standards to ensure the safety and efficacy of goods on the domestic market and to promote the competitiveness of Afghan exports.
The implementation of effective policies and the development of institutions in the area of standards, regulation and consumer protection is an important part of ensuring the equitable operation of the market system. Not only will the development of such systems ensure the safety and efficacy of goods sold in the domestic market but the systems will also increase the markets available to Afghan exports by helping them to meet increasingly stringent international standards required for market access.
In the area of consumer safety, priority should be given to the development of regulation – to be applied to domestically produced goods as well as imports - in high priority areas such as construction materials, pharmaceuticals, fuel and food products. The development of standards and regulations must be done in cooperation with other ministries, the private sector and in compliance with international standards.
An important first step will be the establishment of the Afghan Standards, Metrology and Quality Authority (ASMQA). While this agency will be semi-autonomous, the MoC will provide oversight, policy direction and coordinate inter-ministerial cooperation in this area. As this system further develops, the role of the private sector will be enhanced with the ASQMA providing assistance for the development of firm level quality assurance mechanisms and the establishment of independent laboratory and testing facilities accredited through the ASQMA.
Integrate Afghanistan into the regional and global economy.Integrating Afghanistan’s markets with the global and particularly regional economies will be of critical importance to the achievement of the goals of the MoC. In order to capitalize on its strategic location, the Ministry is committed to maintaining an outward orientation in its policies.
Linkages with global and regional markets will not only ensure the competitiveness of domestic industries but also add to the attractiveness of Afghanistan for investors. With the development of an effective system for international trade and transit, a large portion of future investments will aim to capitalize on Afghanistan’s strategic position as a land-bridge in the Central and South Asia region – using Afghanistan as a regional platform for export.
The key objectives in this area are to:
General Goal/Objective 2.1: Pursue opportunities to liberalize and expand trade within the region.
In the last three years, the MoC has actively participated in regional economic initiatives including the Economic Cooperation Organization (ECO) as well as bilateral negotiations with neighboring countries including Iran, India, Pakistan, Tajikistan and Uzbekistan.
The priorities for the immediate future will require a review of the existing regional trading arrangements with regard to their effectiveness and implementation – identifying areas in which these agreements can be strengthened. Further opportunities for regional integration include possible participation in the South Asia Free Trade Area (SAFTA) and the Central Asian Regional Economic Cooperation (CAREC) program.
General Goal/Objective 2.2: Pursue WTO Accession.
Having received observer status in December 2004, Afghanistan should move as quickly as possible through the accession process – a process that will require continuous focus throughout the next few years. Accession will allow Afghanistan to become a full member of the global economic community and send a strong signal to international investors and traders with regards to the stability and parameters of the trade regime.
As the lead ministry for WTO accession, the MoC is developing a strategy and timetable for accession as well as a plan to take advantage of the capacity building resources and opportunities provided by observer status. A task force to lead the accession process will be established within the MoC. The WTO accession process will require that the MoC coordinate the efforts of other ministries in addition to maintaining an active dialogue with the private sector.
General Goal/Objective 2.3: Maximize the benefits of preferential market access agreements for Afghan exporters.
Outside of the region, Afghanistan is currently eligible for preferential import duties under the European Union’s (EU) “Everything but Arms” Initiative (EBA), the United States’ Generalized System of Preferences (GSP) program as well as LDC preferences granted by Canada and Japan. Additionally, the Government of Afghanistan has recently concluded a “Trade and Investment Framework” (TIFA) agreement that could provide additional benefits in terms of strengthening the trading relationships.
In order to take maximum advantage of these preferences, the MoC must undertake systematic trade analysis to identify and exploit the market opportunities provided for Afghanistan’s exports.
General Goal/Objective 2.4: Strengthen and modernize transit agreements.
In capitalizing on Afghanistan’s position as a land bridge between Central and South Asia, the facilitation of international trade via transit routes is of critical importance. Afghanistan has existing transit agreements or understandings with Pakistan, India, Iran and Uzbekistan and is a signatory of the TIR convention. The Ministry is also an active participant in the Central and South Asia Transport and Trade Forum’s (CSATTF) Corridor Development Plan and is investigating possibilities for expanded participation through involvement in the wider CAREC initiative.
In moving forward, the priority for the Ministry is to strengthen and modernize these agreements by addressing the critical operational issues. In addition to securing access to important seaports in Pakistan and Iran, the MoC is also working to establish and enhance land corridors to provide further access to important markets in Europe, Central Asia, Russia and South Asia.
Developed in close coordination with related ministries as well as the private sector, the MoC policies and initiatives will focus on monitoring the implementation of international transit conventions, negotiating bilateral and regional transit agreements, and establishing dedicated mechanisms for ensuring the implementation of these agreements.
General Goal/Objective 2.5: Develop effective policies and programs for trade facilitation.
Delays, cumbersome procedures and lack of facilities at the border posts give rise to substantial costs which seriously undermine the competitiveness of Afghan exports, increase the cost of imports and discourages the development of transit systems in Afghanistan.
In cooperation with related ministries and the private sector, the MoC is working to reduce the high trade logistic costs by enhancing programs for trade facilitation in several areas. In particular, a high priority is being given to the streamlining of border crossing formalities, the provision of adequate physical infrastructure and the high incidence of truck trans-shipment at the Afghan borders.
The MoC will continue to take an active role within the Inter-ministerial Technical Committee on Cross Border Facilities, co-chaired by the MoC and the Customs Department with the participation of the Ministries of Interior, Transport and Communications. Through participation in initiatives such as the CSATTF Corridor Development Plan, the Ministry is promoting effective cross border operations and investments and facilitating the introduction and development of transport logistics technologies.
The MoC oversees the operation and maintenance of existing trans-shipment facilities at the border ports. In order to improve efficiency, the Ministry is working to upgrade these facilities and in the future to reorganize their management as a joint public/private venture. To provide improved access to facilities for small traders, the Ministry is working to promote the establishment of inland container depots and freight centers in full partnership with the private sector.
The MoC intends to establish the Afghan Trade and Transport Facilitation Committee (ATTFC) that will bring together all stakeholders in the area of transport and transit to address trade facilitation issues including government, private finance and insurance, and the private sector.
Facilitate and promote the development of a dynamic, competitive private sector.As the lead ministry for private sector development programs, the goal of the MoC is to work in partnership with the private sector to revitalize and expand the formal economy – revitalizing traditional sectors and promoting the development of new areas of competitive advantage.
General Goal/Objective 3.1: To encourage the development of the formal economy
The illegal and informal shares of the economy hugely outweigh formal business activity in Afghanistan. This creates market distortions, puts legitimate domestic business at a competitive disadvantage, serves as a disincentive to foreign investment and reduces government revenues. The Ministry is committed to encouraging the formalization of the economy as a major contribution to the overall economic development of the country with a particular emphasis on micro and small and medium-sized enterprises (SMEs).
The Ministry of Commerce will work with all related areas of government to strengthen the institutions that impact private sector development within the formal economy to create a level playing field; improving enforcement, reducing bureaucracy and eliminating corruption.
General Goal/Objective 3.2: To promote and facilitate domestic and foreign investment
The central role of the MoC is as policy maker and facilitator for the direct investment promotion activities. The establishment of the Afghan Investment Support Agency (AISA) in 2003 represented a major first step to facilitating investment in Afghanistan.
Established in 2003, AISA is a semi-autonomous agency under the direction of the MoC. Serving as a one-stop shop for investors, AISA has substantially streamlined the process faced by investors. In the future, AISA will continue to be the central implementer of the investment policies of the MoC, moving increasingly into the area of investment promotion while expanding its activities throughout the country.
In working to increase the level of foreign investment in Afghanistan, the Ministry will negotiate bilateral and multilateral investment agreements. Additionally, the facilitation of bilateral tax agreements in cooperation with the Ministry of Finance will enhance the attractiveness of Afghanistan as an investment location by addressing issues in regards to double taxation of foreign investment earnings.
The Ministry is currently targeting the development of physical infrastructure to enhance private sector development including industrial parks and exhibition areas. The long-term objectives are to provide investors with land, energy, water and road access in a timely and transparent manner by creating industrial parks throughout the country and trade fair areas in Kabul and other major cities.
The further development of this program will also be a key factor in attracting investment to Afghanistan as the geographic focus of an industrial park allows planners to quickly service a large number of investors with utilities and services in a discrete area – instead of forcing investors to wait for a general municipal infrastructure rehabilitation effort that may or may not extend to suitable industrial land.
General Goal/Objective 3.3: To encourage development of competitive and innovative enterprises to increase exports and fulfill domestic demand.
Enterprises must be competitive if they are to succeed in international and domestic markets. Competitiveness at an enterprise level is essential to increase exports and reduce imports. Afghanistan has traditional areas of economic activity which can be developed by making them more competitive, but it is equally important to encourage innovation, both within existing business and by bringing new types of commercial activity to Afghanistan. The Ministry is actively developing several initiatives in this area.
Following the AISA model of a semi-autonomous agency, the National Export Promotion Agency will be the central implementing agency for export promotion policies and activities. Although this initiative is still in the early stages, the agency will serve as a source of market information and promote Afghan products internationally. This agency will work in close cooperation with current and on-going private sector initiatives and be positioned to serve as a link between the private and public sector on issues related to export policy.The Ministry will encourage quality in donor-funded and private sector initiatives to develop management skills and knowledge, a key component of increasing competitiveness and innovation.
Improve the capacity, effectiveness and efficiency of the Ministry of Commerce.In working towards the achievement of the goals outlined above, the MoC itself must undergo a fundamental shift in its roles and functions as it moves from an institution designed to control and regulate the private sector to one whose role is that of facilitator and policy maker. Although restructuring and realignment is being conducted throughout the government, perhaps nowhere is the change as significant as in the MoC. While in the longer term, activities in this area may be considered as supporting the central objectives of the Ministry, in the short run, the magnitude of the necessary reform is such that it will be critical to the effective implementation of policy. The administrative reform process will require a concerted effort on the part of the entire Ministry to fulfill its new roles effectively. In addition to the restructuring of the Ministry itself and that of its associated agencies and institutions, a considerable investment in capacity building will be required at all levels of the Ministry.
The key objectives in this area are to:
General Goal/Objective M.1: Complete the restructuring of the MoC.
The MoC is in the process of preparing to apply for Priority Reconstruction and Reform (PRR) which is designed to establish a rationalized government characterized by a professional civil service. As part of this process, the Ministry is developing a plan for the realignment of its departments creating an effective organizational structure for the achievement of the Ministry’s goals. Extensive discussions within the Ministry and with other related institutions including the Civil Service Commission have resulted in a plan for the restructured Ministry.
General Goal/Objective M.2: Develop and implement a plan for the restructuring and reform of the agencies, institutions and enterprises related to the Ministry.
In addition to the ACCI, the MoC has a number of State Owned Enterprises, Associations and Guilds which fall under its mandate. While these agencies will not be an explicit part of the initial PRR application, their roles and structures must be reassessed within the context of the Ministry’s new objectives.
General Goal/Objective M.3: Develop effective human resource capabilities for the MoC.
As part of the PRR, the restructured ministry will open positions in the MoC to a transparent, competitive application process. An effective human resource department will be the primary instrument used to recruit, train, provide career path guidance, performance management and ensure consistency of approach in personnel matters. A human resources department will be integral to supporting and leading the Ministry through changes such as the current PRR exercise for application of reform status. Most importantly, this department will be the nucleus in conducting the planning, advertising, recruiting, staffing evaluation and support of new staff, as a result of the approval of PRR.
General Goal/Objective M.4: Identify, implement and regularly update the capacity building needs within the restructured MoC.
As the Ministry has reoriented its roles, functions and structure the need for capacity building among the personnel will be substantial in the short run. In addition to basic training in generalized fields such as computer literacy, English, filing, reporting, etc., specific training will be needed to make new and existing staff familiar with tasks in the restructured departments. A significant component of capacity building initiatives will be the development of the analytical capabilities of the Ministry that will increase the capacity of staff to monitor and evaluate the success of policy implementation and increase the quality of statistics and information available to inform decisions. The coordination of this effort must be put in place with specific divisions of responsibilities clearly defined among the implementing agencies.
General Goal/Objective M.5: Foster strong coordination within the ministry, between ministries and between donors in order to make effective use of available resources.
The mission and objectives of the MoC outlined above encompass a wide range of programs and policies. In order to effectively reach its goals, the Ministry must develop a strong coordination mechanism throughout both the Ministry itself and the government as a whole.